Cyclic Hotline
3rd Jun 2001, 20:48
Sunday Times.
BA eyes £300m takeover of troubled Aer Lingus
David Parsley and Maeve Sheehan
BRITISH AIRWAYS is considering a £300m takeover bid for Aer Lingus. This follows Friday's announcement by the government that it has dropped plans for an initial public offering for the troubled national carrier.
Rod Eddington, chief executive of BA, is understood to have been aware of the decision to pull the Aer Lingus float for about a week. He is deciding whether to bid for outright control or a minority stake. The two airlines are in the Oneworld alliance and already operate flights between Britain and Ireland.
Mary O'Rourke, the public enterprise minister, revealed the U-turn when she said the government was now considering a trade-sale of the airline because of poor market sentiment towards the sector.
BA has coveted Aer Lingus for some time. Three years ago Bob Ayling, Eddington's predecessor, made a takeover approach. This was rejected, as was a second attempt to purchase a 10% stake in 1999. American Airlines showed interest in buying a minority stake two years ago, but the Irish government rejected a trade sale.
One BA executive said: "There have been rumours of the float being canned for some time. We heard solid talk about a week ago. We are considering our options with Aer Lingus and may be interested in purchasing a stake, however large. We could do this alone or with a partner."
Aer Lingus had to be rescued seven years ago after getting into financial difficulties and is thought to need almost £200m to update its fleet and modernise operations.
When the government announced the float in 1999, analysts were valuing the airline at £500m. But a downturn in the market has led to values falling, with Aer Lingus now estimated to be worth between £250m and £300m to a trade buyer.
The Irish company has also been riven by claims that Michael Foley, its chief executive, sexually harassed two employees. His future is in grave doubt. He was effectively suspended after an Aer Lingus board sub-committee upheld the complaints. A High Court action to prevent Aer Lingus taking further disciplinary action against him failed last week. The board has now given Foley, who denies the claims, until Friday to respond to the claims against him. Impact, the union representing more than 2,500 workers at the company, has sought a meeting with O'Rourke to complain about the board's handling of allegations, and the acrimonious fallout.
Analysts believe BA's most likely decision will be to opt for a full takeover bid. Despite Aer Lingus's woes, it offers some hefty attractions for Eddington.
Most importantly the Irish carrier holds almost 14,000 slots at Heathrow, Europe's busiest and most congested airport. The airline also offers a good opportunity to increase its passenger numbers from Dublin into British regional airports.
BA's alternative to a full bid for the group is understood to be a link with another Oneworld partner such as American Airlines. In such a case the two leaders of the Oneworld alliance would share control in the Irish airline.
Eddington has been seeking a European takeover since last year. His attempts to merge with KLM, the Dutch national carrier, fell apart last summer when the two airlines could not agree on various issues.
BA eyes £300m takeover of troubled Aer Lingus
David Parsley and Maeve Sheehan
BRITISH AIRWAYS is considering a £300m takeover bid for Aer Lingus. This follows Friday's announcement by the government that it has dropped plans for an initial public offering for the troubled national carrier.
Rod Eddington, chief executive of BA, is understood to have been aware of the decision to pull the Aer Lingus float for about a week. He is deciding whether to bid for outright control or a minority stake. The two airlines are in the Oneworld alliance and already operate flights between Britain and Ireland.
Mary O'Rourke, the public enterprise minister, revealed the U-turn when she said the government was now considering a trade-sale of the airline because of poor market sentiment towards the sector.
BA has coveted Aer Lingus for some time. Three years ago Bob Ayling, Eddington's predecessor, made a takeover approach. This was rejected, as was a second attempt to purchase a 10% stake in 1999. American Airlines showed interest in buying a minority stake two years ago, but the Irish government rejected a trade sale.
One BA executive said: "There have been rumours of the float being canned for some time. We heard solid talk about a week ago. We are considering our options with Aer Lingus and may be interested in purchasing a stake, however large. We could do this alone or with a partner."
Aer Lingus had to be rescued seven years ago after getting into financial difficulties and is thought to need almost £200m to update its fleet and modernise operations.
When the government announced the float in 1999, analysts were valuing the airline at £500m. But a downturn in the market has led to values falling, with Aer Lingus now estimated to be worth between £250m and £300m to a trade buyer.
The Irish company has also been riven by claims that Michael Foley, its chief executive, sexually harassed two employees. His future is in grave doubt. He was effectively suspended after an Aer Lingus board sub-committee upheld the complaints. A High Court action to prevent Aer Lingus taking further disciplinary action against him failed last week. The board has now given Foley, who denies the claims, until Friday to respond to the claims against him. Impact, the union representing more than 2,500 workers at the company, has sought a meeting with O'Rourke to complain about the board's handling of allegations, and the acrimonious fallout.
Analysts believe BA's most likely decision will be to opt for a full takeover bid. Despite Aer Lingus's woes, it offers some hefty attractions for Eddington.
Most importantly the Irish carrier holds almost 14,000 slots at Heathrow, Europe's busiest and most congested airport. The airline also offers a good opportunity to increase its passenger numbers from Dublin into British regional airports.
BA's alternative to a full bid for the group is understood to be a link with another Oneworld partner such as American Airlines. In such a case the two leaders of the Oneworld alliance would share control in the Irish airline.
Eddington has been seeking a European takeover since last year. His attempts to merge with KLM, the Dutch national carrier, fell apart last summer when the two airlines could not agree on various issues.